If you're a first-time buyer, a tracker mortgage could be a good option if rates are low, but it might be wise to find a deal with a cap if you're not sure you could make higher payments should the rates increase.
What is a tracker mortgage? A tracker rate mortgage, unlike a fixed rate mortgage, means your interest will rise and fall in line with another interest rate – typically the Bank of England's base rate – for a certain period of time. This is usually two or five years.
But while a tracker can initially be cheaper than a fixed rate, you are taking on the risk of what the underlying interest rate might do. If it is tracking the base rate and that rises during your mortgage deal, you could end up paying more than if you had opted to fix your rate.
Can you leave a tracker mortgage at any time? expandable section. Leaving a tracker mortgage works much the same as other mortgage types. This means that you might have to pay an Early Repayment Charge to leave your deal early.
Choose a tracker period that suits you
You can choose a tracker for a set term. At the end of the term, you can either switch to a new tracker or fixed rate, or we'll move your mortgage to our follow-on rate.
(b) the margin/adjustment above the ECB rate, this will stay static throughout the life of the loan. You can make extra mortgage repayments or clear your mortgage earlier than agreed without having to pay any penalties.
You can generally get a tracker mortgage for an introductory period, usually between 1 – 5 years or you can get a lifetime tracker, which will last for as long as your mortgage.
The current BoE (Bank of England) base interest rate is 4.75%, following the most recent Monetary Policy Committee on 19 December 2024.
Whilst lenders apply early repayment charges to fixed-rate deals, lenders don't always penalise you with ERCs for tracker mortgages. This means that you can switch to a new deal with your existing lender, remortgage with a new lender or make overpayments without being charged a hefty fee.
Yes. A mortgage lender will look at any depository accounts on your bank statements — including checking and savings accounts, as well as any open lines of credit.
If you are currently on a Fixed rate or Tracker deal you can usually overpay up to 20% of your remaining balance per annum. If you overpay more than 20% of your outstanding balance in any one year, it could result in an early repayment charge.
Lifetime tracker mortgages have no fixed end date, and in theory tracks the Bank of England base rate for the full term of the mortgage. As they have no formal end date, they are usually 'switch and fix' type mortgages that enable you to move to a different rate without an exit charge.
In addition to time, you could also save money by using a mortgage broker. Not only are you getting an expert who can find a good deal, but you're getting someone who will assess your needs and make a recommendation that is right for you financially.
Fixed rate mortgage - A mortgage with a fixed interest rate for a set period. This means the base rate won't affect your rate when it goes up. But if the base rate goes down, you won't pay any less. Tracker mortgage - Linked to the Base Rate.
Fixed deals also give you price certainty, as you know your monthly payments are fixed for the duration of the deal. This doesn't apply to short-term tracker mortgages – a possible alternative to a one-year fix – which have variable rates of interest (meaning your monthly payments can change).
At its February 2024 meeting, the Reserve Bank Board decided to leave the cash rate target unchanged at 4.35 per cent. This decision supports progress of inflation to the midpoint of the 2–3 per cent target range within a reasonable timeframe and continued moderate growth in employment.
It's common to see monthly mortgage payments fluctuate throughout the life of your loan due to changes in your home value, taxes or insurance.
If you have a variable rate mortgage (SVR, LTV, Tracker) you can reduce the term by paying a lump sum or increasing your monthly mortgage repayments.
The term of a mortgage is the length of time a lender will loan mortgage funds to a borrower. This duration can be from six months to ten years, with two to five years being the most common. Generally, the shorter the duration of a mortgage term, the lower the interest rate, and the less it costs to borrow the money.
Mortgages: Tracker mortgage rates will reduce by 0.25% for all (Tracker) mortgages linked to the ECB rate. The change will happen during December 2024 & January 2025 and we will write to our customers with Tracker mortgages confirming the new interest rate and the date it's changing.
How much is an early repayment charge? An early repayment charge is usually between 1% and 5% of what you still owe on your mortgage agreement. You might be able to pay less if you have been with your lender a long time, but this is up to the lender. You can choose to pay your early repayment charge in one lump sum.
Making an extra mortgage payment each year could reduce the term of your loan significantly. The most budget-friendly way to do this is to pay 1/12 extra each month. For example, by paying $975 each month on a $900 mortgage payment, you'll have paid the equivalent of an extra payment by the end of the year.
Get it right and overpaying your mortgage can be a huge cash boost, because... You'll be eating into the debt you've built up from buying a home, meaning you can be mortgage-free sooner (it's important to make sure any overpayments reduce the debt and shorten the term, rather than reduce your monthly payments).